restaurant, you make a better choice, like there's a lot of choices. oh, i didn't realize the muffin had more calories than the donut that i want. with the soda saying get this soda, that's not capitalism. that's all the time we have for you today. we'll see you back here tomorrow and "the willis report" is up next. have a coke. gerri: tonight, small investors bailing out of the stock market. what's going on? what could bring them back? former head of the fcc is here. china fires back at a congressional report that says two of its big companies are a security threat. the top democrat on the house committee will be here. welcome to "the willis report." ♪

hello, i'm gerri willis. the looming fiscal cliff 12 weeks away. it's on everybody's mind from wall street to main street from the u.s. chamber of commerce to the retail federation. they were discussing the issue and how to get the economy back on track. wall street's top ceos and jpmorgan's dimon saying it's time for a deal. they are tired of kicking the can down the road. avoiding the fiscal cliff requires political sacrifice on both sides. they are not alone wanting a certain degree of state for the markets, and in turn, for investors. joining me is president for america's for tax reform. welcome back to the show. a pleasure to be with you here. >> great to be with you. gerri: they want more in taxes, cutting in spending.

with friends like these, who needs enemies, grover? how do you react? >> read today's "new york times," there's an article about the idiot rich businessmen in france who raised taxes a little bit and cut spending and elect the socialist president of france who is now raising their personal income taxes to 75% and their capital gains taxes to 60%, and these very, very smart businessmen who brought this on themselves are running for the borders. gerri: nobody's suggesting that here. in fact -- >> they were not in france either. gerri: even mitt romney in the debate said why not bowles-simpson? it's a balanced approach. you're not in favor of it. >> of course not. he was talking about what simpson bowles says it wants to do sometimes which is restrain

spheppedding and have revenue neutral reform. if you read the fine print of simpson-bowles, it takes taxes from 18.5% of gdp, its normal for the last 30 years, to it 2* # 1%, a #.5% increase in taxes of gdp to $5 trillion tax increase over the next decade. $5 trillion tax increase. the spending cuts, of course, have been rejected by obama. he put none of them in the budget. gerri: that's the problem. >> all he wants is the tax increase. gerri: that's the problem in the nutshell. raising taxes they don't want to curb spending. what happens if we go over the fiscal cliff? at the end of the day, we have a choice, go over the cliff or do something; right? here's what happens. 90% of households have a tax increase, average of $35 # 00. these may be citing your numbers here. we got the obamacare taxes

coming into place. this is truly a disincentive to saving, a disincentive to investing, and a disincentive to working. what's better? go over the cliff or find some compromise? >> no, no. there's not a compromise to be made because there republicans, if you legislate romney in a republican house and senate, will extend all the bush tax cuts for one year, do fundamental tax reform that's revenue neutral, not a tax increase, passing the ryan budget to bring entitlement spending down so the spending goes from 24% of gdp to 20%, 16%. if obama wins, democratic house and senate, his budget takes spending up to 38% of the economy during that same period. a government twice as large. if you have split government, obama gets elected in a republican house or republican house or senator, what happens is exactly what happened two

years ago which is they'll extent bush tax cuts for two years and fight it out in two years. there's not going to be a cliff. everybody knows this because if obama shuts down the government in january, the democrats lose ten senate seats, ten of which are vulnerable in 20 # 14. a democratic senate and republican house encysts that obama extends the tax cuts. gerri: i'm not sure everybody is so sanguine. mitt romney's been called a liar for the ideas on taxation and taxes. he wants to cut taxes 20% across the board for everybody, the poor, the wealthy, the people in between. can you do that and get rid of breaks in the tax code for wealthy people and come out with anything like a balanced budget? >> well, two things. yes, you can bring in the same amount of revenue with tax

reform, but, remember, republicans believe if you do marginal tax rates, you actually get more growth. when reagan cut tax rates, he added 10 million more people not work rolls than obama's spend more approach. put 10 million people to work, take in reagan's approach to the recession would have jobs, that's a lot of revenue coming to the government and growth as a result. yes, romney's proposal, cut marginal tax rates and reign in spending is what reagan did and it's what created rral jobs. we know obama's plan has not worked. gerri: requires a lot of growth and job making in the economy. >> absolutely. gerri: to the point, imf revising down, growth expectations worried about the fiscal cliff. what do you think of that? >> well, look, we should be very concerned. if obama is re-elected, the country's headed for difficult

times meaning obamacare with trillions in spending and tax increases will take effect and get locked in. if you have insurance, taxes go up. you won't keep the health insurance you now have because they will go after that, not just medicare, but your insurance and tax it with 20 taxes to give money to other people. there's a lot of damage coming to the economy with obama being re-elected. the polls show that's less likely today than a week ago are very helpful to the economy and may mean we can get through this without another recession. gerri: we talked about the multimillion dollar campaign that the leaders in washington, the ceos, wall street, and others put together. ironic, isn't it? wall street ceos defend themselves in front of congress, but they are chiding them for not doing their job. it's funny. grover, thank you for your time. >> good to be with you.

gerri: all right. the fiscal cliff will no doubt hit regular investors hard. many lost faith in the stock market pulling more than a hundred billion dollars out of mutual stock funds out of fear since 2009. the former chairman of the securities and exchange commission joins me now by telephone. chairman, thank you for coming on the show tonight. great to talk to you. it's been yeahs since i talked to you, and i want your opinion on this move, this free-for-all by small investors out of the market, runs away. 46% of americans say they own stocks today. 53% did in 2001. what's causing this? on the phone: i think there's general fear with all the scandals seen, the insider trading episode, the glitches that shut the market down, high frequency trading that nearly

drove securities out of business, a whole seeshz of events like that since 2008 scared the heck out of the average investor and forced them to lose trust in our market, sell their funds and sit on the sitelines. gerri: you were a proinvester advocate, cleanedded up the bond market at the time, longest serving fcc commissioner. how do we fix this problem? how do we reintroduce confidence in the system? >> caller: well, i think that it almost comes as a result of the system getting better. by that, i mean, the regulators have got to understand now product, new techniques, new market strategy. they don't right now. the people that are being regulated, the firms that are doing the business, are way ahead of the regulators in terms

of their level of understanding. the biggest mistake would be for regulators to over regulate. next to that would be the mistake of having them not pay attention to what caused the problems with knight security? what caused the minimarket crash two years ago? how can you ensure investors there's secure markets in the future? what that is is sound, rational, reasonable regulation if that's possible. gerri: but when you dig into what the fellows are doing for a living, and these are dark pools that exist all over the country, all over the world. in fact, it's such a far cry from the kind of investing you were used to regulating when you ran the fcc. these people make decisions not on the basis of any fundmentals whatsoever driving the market

further and further from the function of raising capital for ceos and companies all over the world, and so something that's more akin to betting, wouldn't you say 1234 -- >> caller: not necessarily. i admit it looks like this, but this is progress in terms of the price of an investor buys securities that is lower than ever. the speed of execution is faster than ever: now, how do we balance that with the interest of the investors? to see to it they get at least a good a deal as institutions are. i noticed the fcc just hired an outside firm -- gerri: hired one of the high frequency trading firms to assist them, and it's a controversial move because people feel why are you letting the rooster into the hep house or the fobbing -- fox into the hen house. what do you make of that?

>> caller: it's a good move. they had a contracting process, and the firm is providing the pipes to deliver data streams. they are not performing analysis for regulators. it's like getting a mason to build a brick wall or a car manufacture to build the car. once the fcc has the car, it's up to them to drive it guard and arrive at the relevant conclusions. they need professional help. they no longer can rely upon long term civil service to deal with the progress made by people in the markets who provide products and new structures which narrow the mar gyp of risk to milliseconds. in the old days, we had seconds to correct the mistake. today, it's milliseconds. gerri: that's right. thank you, appreciate your time. interesting point of view on high frequency trading. we'll continue to cover it. i hope you come back.

>> caller: i'd be delighted. good questions. gerri: what do you think? here's the question tonight. do you have faith in the stock market? log on to gerriwillis.com and vote. i'll share results at the end of the show. a lot more to come. the race to the white house shrinks to nine states and how residents in swing states are buried by at administration. another pee project produces nothing, nadda, zero, zilch. stay with us. ♪

green and waste of time. a hybrid battery plant in michigan is putting workers on furlough despite the $150 million grant. the plant has not produced a battery since it opened two years ago. with more on this, the republican candidate for senate and former congressman, policy onlyist for heritage foundation. welcome to you both. congressman, starting with you. okay. so the plant that got $150 million in taxpayer money is laying people out off. another solyndra here? >> it's very, very possible. the president announced this, came through my hometown, holland, michigan, did a victory lap in the community saying look what the federal government did for you, create k this investment, creating jobs, and

insulted their hometown congressman for not voting for the package, and three and a half years later, and it looks like it's a bad investment. all of us that live in the community are disappointed. you know, the problem here is the president wasn't spending the government's money. the president was spending our money. this money all went on our credit card, like for the losses that are incurred. gerri: nick, to you. the mayor in holland said he had to do this, no other options. do you agree with that? >> no, he could have not spent the money. the reality is this administration with a lot of the stimulus funding has taken field of dreams, if they build it, they will come, but there's a lack of consumer demand for electric vehicle which is why there's zero supply. if there was a demand, this wouldn't be a problem, and they wouldn't need tax funding to

begin with. whether the company is successful or not, it's a lose-lose. it's a loss going bankrupt and a loss because it's justify setting private investment if the firm were successful. gerri: good point. let's see what the president, himself, said about the investment. >> you are leading the way and showing how manufacturing jobs are coming right back here not united states of america. our goal has never been to create a government program, but rather to unleash private sector growth, and we are seeing results. gerri: congressman, what do you say? seeing results? >> no, we're not seeing results. it's a disappointing thing. it's what happens when we believe government is better at making investment decisions than the private sector. the folks at the energy department who made this bet, who took the risk, they played with our money, played with the taxpayers' money. they had no skin in

there's a lot of companies that failed. do you think this is going to be -- is this going to hurt the president politically in any way? >> well, i hope so. that's what elections are about, about holding politicians accountable. the president spent a trillion dollars on a stimulus plan that did not create jobs, that did not move the economy forward. mitt romney is promising lower tax rates for all businesses and let the private sector drive the future of the economy and not the government. the american people have a

choice, it's their responsibility to get educated and make a choice. gerri: nick, to you. we had a screen that showed 150 million federal grant, zero batteries produced. there's other numbers as well. this ignores the property taxes, forgave annually for business taxes. it's more than just $150 million; right? >> oh, absolutely. that gets to the heart of the problem with government subsidies is that these companies, once dependent on the federal government and the taxpayers' dollar, they stay dependent on the government's dollar. that's why we see programs like the ethanol policy continually dependent on the government since 1978 and once they get stuck on this government dependence, it's hard to wean them off because they really don't understand their true cost point, and they don't have that true incentive to be

competitive. gerri: they exploit the money, go after it, they know how to do it. nick, congressman, thank you for coming on tonight ill line illug this program. i hope you both come back, thank you. >> thank you. >> thank you. gerri: all right. many employers cutting back, restaurantings seeing the strongest year in a decade, by the hiring boom comes from a caveat. they are part-time jobs. our guest yesterday told us why that is obamacare. >> if you've got an employee working 40 hours and the employee quits, retires, or terminated, you have a choice. you can hire another 40-hour a week employee and incur costs, the costs of obama care, or hire two employees that work 20 hours a week, and you don't have the costs, and, therefore, you can taurant, create jobs, do the things that businesses like to do. gerri: smart guy.

he was right. the owner of olive garden and red lobster restaurants are putting workers on part-time status to avoid the cost of obamacare. the ceo says in these markets, workers work less than 30 hours a week so they don't have to provide health coverage. we told you it was coming, folks. >> key battleground states, which state could be worst hit and what it means for this year's election next. and president obama keeps saying this -- >> al-qaeda's on the run, and bin laden is no more. >> reporter: is al-qaeda really on its heels? what's the president not telling us. weekly standard senior editor is here with the answers. also, china issues its strongest statement yet to the congressional report blasting chinese companies as a security threat. will that start a trade war with the u.s.? we're on the case next on "the

willis report." ♪

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to a high-tetech masterpiece? ♪ whatever your business challee, dell has the technology and services to help you solve it. gerri: how bad things are in the all-important battle ground states.

gerri: well, when you talk about the bottom line, there's a few things more telling than your income. what are you making? is it more than a year ago? less than a year ago? it's a measuring stick that everybody uses, but for americans around the country, income is not a good news story. we are worse off than four years ago when the president assumed office, assuming you were employed at all. median incomes tanked, 8% fall

in four years. swing states across the country, the news is the same, that is. look at ohio where both candidates are campaigning today. incomes fell from $50516 to $45749 in just four years. now, the good news, unemployment fell from 8.6% to 7.2%, but the sting of the great recession never really left. foreclosures, for example, remain high. in florida, where obamacare struck a nerve with the statings nearly 3 million seniors, income femme to 42499 and same goes for colorado which saw incomes fall from nearly $60 # ,000 a year in 2007 to around $55,000. in virginia, which has some of the nation's highest incomes, they saw an average salary of $65,000 drop to under $62,000. iowa and wisconsin have incomes that have actually risen in the

last year, but they are still down from 2007. people look at the states where residents faced a loss of $5,000 in income or more and say that's not that much money. consider this. the average family earns less while paying more for gas. 134% more since obama took office. more for food, 54 #% more. even vice president joe biden agrees. >> this is deadly earnest, man, deadly earnest. how they can justify -- how they can justify raising taxes on the middle class that's been buried the last four years, how in lord's name can they justify raising their taxes? gerri: buried over the last four years. that's absolutely right, joe biden. the cost is rising at a time when incomes are curtailed. we're getting squeezed. it's a disaster for americans and a story that can want become

the trend. coming up next, china ups over the explosive report on chinese security threats to america, and the issue of the report is here next. 0t[h7

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gerri: china, today, issuing the strongest statement after yesterday's explosive congressional report on the threat from china's top telecom companies. they are national security threats, and we should not be doing business with them. china fired back sighing the report will damage relations between the two countries. joining me now is the top democrat on the house intelligence committee which issued this report. sir, thanks for being with us today. we appreciate your coming on, and, of course, the chinese

today, the government having this to say. i want to get your response, your report is merely based on subjective conjecture, untrue foundations, making groundless ac accusations against china. your response, sir? >> we're the intelligence committee. our job is to collect information and data to protect the citizens from a social security point of view. chairman rogers and i decided a year ago to investigate china cyberattacking our country, and we were going investigate the chinese companies because of complaints we've had of unfair trade and possible connection between china and the two companies. gerri: well, what i thought was interesting is it's bipartisan. the two of you represent both sides of the aisle. there's not a disagreement about the impact. >> that's ews right there that it's bipartisan. that's just a joke, but basically, chairman rogers and i run the committee in a

bipartisan way, not political, and we'll stand behind the report. gerri: you say "our report," but there's two reports. the one released and the classified version. how red hot is the classifieded version? what damming evidence is there if we read it, which we won't, will we see? >> the intelligence committee, there's certain information we cannot give to other people unless they are cleared. we can say any information that's classified we feel a crime has been committed in the country, we will refer that to the justice department, and that's what we are doing now. back to the china comment too. unfair trade -- i said as far as i'm concerned, if china wants them to do business in our country, they have to stop cyberattacking us. i met with the chairman in hong kong -- gerri: one of the few. >> i know, i found that out later. i said to him, if you want to do business in our country or other countries, especially our

allies, tell your chinese government to stop cyberattacks our country. gerri: what are they doing? what information are they getting access to? >> for example, just last year our cybercommand, whose job it is to protect the military infrastructure from the cyberattacks estimated that there are over -- the united states businesses lost over $300 billion because of cyberattacks, and we have evidence that china has been cyber attacking us. that's $300 billion, jobs lost, china getting unfair information to be used against us in the united states and unfair competition. we can't tolerate that. another thing that we can't tolerate is to have chinese businesses that control china has over their companies. china is a come -- communist country, not a democracy. it would be easy for them to grow in the country, hhve american customers, and china saying we want information from

your customer. get this information. once you are in the network, and you have the technology, you will be able to get that information. we want to protect our country. gerri: it's lome like a future problem to be worried about. the chinese attacking back saying the report violated long held free market principles, undermind cooperation and development between the two countries. it sounds like they are threatening us. >> chinese rhetoric. they try to say we're china bashing. if they want fair trade, have fair trade with our country. don't come into our country and try to gain information from our country. if you want your businesses to do business in our country, then stop cyber attacking us. the united states of america does not cyber attack other countries' businesses and get unfair information. china is doing that. if they want their businesses to have fair trade pursuant to international law, let's have free trade. it's not just the cyber area,

but car manufacturing parts and auto parts, in steel. china's rhetoric is just rhetoric as far as i'm concerned. we have to be concerned about the free trade. we will not let them come into our country with their businesses to get information from our citizens, company or individual. thars way we are doing. we want to let our citizens know ahead of time before this occurs than after the fact. we need to learn what happened from 9/11. gerri: sounded a loud siren this weekend on $60 minutes," and on monday with your reports. thanks for coming on. come back and talk more about it. we are all worried. congressman, thank you very much. >> thank you. gerri: home prices back to 2006 levels, we'll have the numbers, and is obama and company traveling the country saying gm is alive and bin laden is dead. think twice before counting al-qaeda out just yet. stay with us.

gerri: nearly one month since the deadly consulate attack, and president obama declarings al al-qaeda on its heel, but are they just regrouping into a

stronger threat? christopher, thank you for being with us today. i'm 5 fan of your work and interested in what you have to say what's going on in the topics recently. the president, just last night, as a matter of fact, saying al-qaeda's opts -- on its heels. i want you to respond spp. >> i said we'd end the war in afghanistan, and we are. i said we'd refocus on the people who attacked us on 9/11,@ and, today, al-qaeda is on its heels and bin laden is no more. gerri: is the president right? he's at a strong appointment to make for re-election there. we are leaving afghanistan. he did kill bin laden, but that doesn't mean that al-qaeda is quite through. i mean, there's been a number of attacks, not the familiar seriousness, but in egypt and tunisia and today in syria by

groups that claim an afghanistan to al-qaeda. gerri: cbs said that the taliban and al-qaeda have not been vanquished, basically not by a long shot, just rebuilding to come back. senator bob corker essentially said the same thing. do you believe that? they're in a rebuilding mode to attack again, and becauseewe think the job is done and that it's finished, over, we won't be prepared? >> well, i don't think anyone thinks the job is really done. i think that al-qaeda, as it existed on september 1 # -- 11, 2001, was a real terrorist cell. for the last five or six years, it's been a kind of an ideological movement. there's always the possibility that it can crop up again just through the enthusiasmmof a few local extremists. gerri: what do you make of the message sent by the administration in the way they handled the assassination of our

libyan ambassador? >> it's very confusing. as i say, their case that it was this administration that killed bin laden is very strong. i really don't think they are@ trying to prove that al-qaeda has been completely eradicated. i don't think that -- i don't think that that's why they've had such a funny message centered around this muslim film. i have a hard time explaning it, but i think that the administration wants us to believe -- gerri: critics of the administration, though, who say there's confusion in the way they present this, leaving people like you familiar with the issues confused, creating an al-qaeda that's emboldening our enemies, making them stronger. you make the case in your book that it's important to be on

guard in every way and every level. what do you think is going to be the message long term of what's been going on for several weeks here where we seem to be saying that's okay. that's okay. it's a problem we can work with rather than, no, this is a terrorist attack that we need to take seriously? >> well, i think that what the administration's generally doing and what they did having susan rice go out and say it was a mob angry about a film rather than a terrorist attack, they are trying to reenforce a narrative that president obama has changed the minds of the people in the muslim world who were against us, and that turns out not to be quite what happened in the last four years. i don't know if it adds to the danger, but it certainly misdiagnoses a part of the problem. gerri: christopher, thank you. we appreciate your time. >> thank you, gerri. gerri: still, my two cents more on waste, fraud, and abuse in washington, of course, and home

prices not only rising, but in some cities, they are at the highest levels ever. next, how home buyers and homeowners benefit from these peaks. 0t[h7

gerri: home prices hitting all-time highs all across the country. what's driving them? find out in 10 minutes.

gerri: tonight, home prices hitting all-time highs in dozens of cityings across the u.s. according to mortgage tracker lending processing services. what parts of the country are seeing the biggest gains? what's spurring it? here with more, the chief economist of trulia. thank you for being with us

tonight. we appreciate it. where are the places doing so well? >> thanks for having me back, gerri. some places doing well, prices back to where they were, places like pittsburgh, austin, and denver. places you don't think of together in the same sentence, but they all saw relatively small price declines in the housing crisis. it's not taken that big of an increase now to get back to the highest prices, almost ever, in some of the markets. gerri: all right. look at the ones with the biggest price gains. detroit and phoenix, and i look at those two cities, and i i think, you know, i might buy in phoenix, but i don't know about detroit. you wonder about the economy there. how do you analyze the two cities? >> the biggest increases year over year are in places rebounding. both phoenix and detroit as well as lots of metros in florida and other parts of the country had huge price declines in the bust,

up to 50% down. those are in the places with the biggest rebounds now, but it doesn't mean they are all the same. phoenix is driven by job growth. gerri: that's a good thing. i like to hear that. look at red flags. biggest red flags. you mentioned florida a moment ago. florida, illinois, and new jersey. why should i be weary? >> those are all places where the foreclosure process takes a long time. those are states with a much bigger backlog of foreclosures than just anywhere else in the country. as the foreclosures come on the market, they push prices down. the price gains disappearance. gerri: one of the things so important to the market and what we have need to have housing come back is jobs. we are seeing that in california bay area, north carolina, denver, texas, and oklahoma. is there a great way to predict where home prices are going to rebound and grow?

>> jobs are really strong predictor of what happens to home prices. that tells us about the command side. the supply side matters telling us how much inventory and how many vacancies are there in the markets. california has low vacancy rates, good for prices, but parts of the midwest and florida where vacancy rates are high from all of the over building in the bubble. all of that overbilling in the bubble, places where it takes longer to see sustained price increases. gerri: a lot of elements baked into a home price. one of the things is how much inventory there are on banks' books. are we at the end of that or homes on banks' balance sheets for a long, long time to come? >> the invenn story on bankbooks depends on what part of the country you talk about. in most of the country, banks are through a lot of the

inventory they had to take on, a lot of that reo is behind them. in places with a slower foreclosure process like florida, new jersey, and also new york, not necessarily big price declines, but a slow foreclosure process that there's a lot of homes in the backlog with a lot of homes on the books. gerri: the report shows prices are back substantially, but we're still well below where we were, the highs seen for most markets. you see prices increases 4% year over year. when do we get back to 2006 levels for the country? >> some markets may never get back to 2006 levels. markets in inland california like stockton and modesto, prices rose so fast, much higher than what local incomes or jobs could support. what we're looking at to get back to normal is not 2006 prices, but what it looked like

before 2002, before the bubble started. what a normal level of construction is, prices back then. gerri: you're being rational with me. >> sorry, it's a fault. gerri: no, no, it makes sense. thank you for coming on tonight, a pleasure to have you with us, thank you. >> thanks for having me. gerri: we'll be right back. [ male announcer ] at scottrade, you won't just nd us online, you'll alsfind us in person, with dedicated support teams at over 50 branches nationwide. so when u call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades a just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying... [ all ] i'm with scottrade.

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that puts us in control. our abundant natural gas is already saving us money, producing cleaner electricity, putting us to work here in america and supporting wind and solar. though all energy development comes with some risk, we're committed to safely and responsibly producing natural gas. it's not a dream. america's natural gas... putting us in control of our energy future, now. gerri: well stocks slid today following a weak forecast of global economic growth and poor expectations for earning season, that kicked off just a few hours ago. in the backdrop, many -- are leaving starky on the foy on! -t for good. what do you think? we asked. 30% said yes, 65% said no,

shocking. >> finally more examples of waste, fraud and abuse in november, federal agents to cut off wasteful spending according to the group 9 of ac 9 agent officers spend more than a million dollars on such items, l deputy issue spent 39,000 on a handful of gadgets including ipods. the different of interior fish and wildliff spent 86,000 on such items. department of homeland security spent nearly three quarters of a million dollars on awards. how are they going to cult the stuff that really impacts the debt and our deficit? this is a growing problem that can't be fixed with a scalpal,